Klein & Wilson

Sprint and T-Mobile walk away from potential merger

In what was poised to be the largest merger in the telecommunications industry this year, T-Mobile and Sprint recently announced that they would abandon their efforts to combine their companies. The joint announcement ended days of speculation that the two companies were having difficulties negotiating ownership of their respective shares of their coveted U.S. telecom holdings. The parties did not comment on any specifics leading to them walk away from negotiations, but some speculate that Sprint’s debt load, estimated at $38 billion, could have been a sticking point.

The proposed merger would have created a new company with more than 130 million wireless subscribers, which still would have been third in the U.S. behind Verizon Communications and AT&T. Sprint and T-Mobile are currently the third and fourth largest carriers, respectively. 

Analysts note that Sprint and T-Mobile considered a merger in 2014, but the union was shelved given concerns about regulatory reforms under the Obama Administration. Under the current administration, it was believed that such a merger would be welcomed.

Nevertheless, consumer advocates noted that the failed merger would keep prices low as competition would not be reduced. But since the companies issued a joint statement about not joining forces this time, the possibility of a future merger cannot be dismissed out of hand.

Ultimately, the story is an example of why an experienced business law attorney is necessary in proposed mergers. A skilled lawyer can help a company understand the finer points of a merger agreement and identify critical post-transaction issues that could arise.

The preceding is presented for informational purposes only. 

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